Let's Practice Building A Decision Tree

Cure 'em Now is a healthcare organization considering joining a Preferred Provider Organization (PPO). A PPO plan offers a network of healthcare providers that subscribers can use for their medical care and is generally an option that employers offer for their medical coverage plans. The organization offers clinical (family medicine) and mental health services. If Cure 'em Now joins the PPO, they are agreeing to provide care at specific rates. The executive team is seriously considering making the move to the PPO, but they want you to do an analysis. If there is a 30% improvement in cost, then Cure 'em Now will join the PPO. Complete the decision tree and submit your analysis and recommendation to Cure 'em Now. Hint: You are looking to minimize costs associated with care. Once you have completed your calculations compare the two costs. If joining the cost associated with joining the PPO is less than 30% (or greater) of the cost of continuing as they are, then you join the PPO. Revenues Hospitalized P(0.56) -- $3,500.00 >= Deductible Clinic Visit P(0.580) P(0.500) 700.00 Join PPO Outpatient Visit P(0.440) Mental Health Visit P(0.420) 500.00 = Deductible Clinic Visit P(0.50) P(0.580) $ 2,000.00 Outpatient Visit P(0.440)| Continue As Is Mental Health Visit P(0.420) | 118.00